0001409375
2011-08-05
0001409375
2010-09-30
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2011-03-31
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2010-04-01
2010-06-30
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2011-04-01
2011-06-30
0001409375
2010-03-31
0001409375
2010-06-30
iso4217:USD
xbrli:shares
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ORION ENERGY SYSTEMS, INC.
0001409375
--03-31
No
No
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Accelerated Filer
10-Q
false
2011-06-30
Q1
2012
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<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 1 - us-gaap:OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-->
<div align="left" style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<!-- xbrl,ns -->
<!-- xbrl,nx -->
<div align="center" style="font-size: 10pt; margin-top: 0pt"><b></b>
</div>
<div align="left">
</div>
<div align="center" style="font-size: 10pt; margin-top: 0pt"><b></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>NOTE A — DESCRIPTION OF BUSINESS</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Organization</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company includes Orion Energy Systems, Inc., a Wisconsin corporation, and all consolidated
subsidiaries. The Company is a developer, manufacturer and seller of lighting and energy management
systems and a seller and integrator of renewable energy technologies to commercial and industrial
businesses, predominantly in North America.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In August 2009, the Company created Orion Engineered Systems, a new operating division
offering additional alternative renewable energy systems. During the quarter ended December 31,
2010, the new division exceeded the thresholds for segment reporting and, accordingly, the Company
introduced the presentation of operating segments in that quarter. See Note I “Segment Reporting”
of these financial statements for further discussion of our reportable segments.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company’s corporate offices and manufacturing operations are located in Manitowoc,
Wisconsin and an operations facility occupied by Orion Engineered Systems is located in Plymouth,
Wisconsin.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 2 - us-gaap:SignificantAccountingPoliciesTextBlock-->
<div align="left" style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>NOTE B — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Principles of Consolidation</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company’s consolidated financial statements include the accounts of Orion Energy Systems,
Inc. and its wholly-owned subsidiaries. All significant intercompany transactions and balances have
been eliminated in consolidation.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Reclassifications</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Where appropriate, certain reclassifications have been made to prior years’ financial
statements to conform to the current year presentation.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Basis of presentation</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The accompanying unaudited condensed consolidated financial statements of the Company have
been prepared in accordance with accounting principles generally accepted in the United States
(GAAP) for interim financial information and with the rules and regulations of the Securities and
Exchange Commission. Accordingly, they do not include all of the information and footnotes required
by GAAP for complete financial statements. In the opinion of management, all adjustments,
consisting of normal recurring adjustments, considered necessary for a fair presentation have been
included. Interim results are not necessarily indicative of results that may be expected for the
fiscal year ending March 31, 2012 or other interim periods.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The condensed consolidated balance sheet at March 31, 2011 has been derived from the audited
consolidated financial statements at that date but does not include all of the information required
by GAAP for complete financial statements.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The accompanying unaudited condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and footnotes thereto included in
the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2011 filed with the
Securities and Exchange Commission on July 22, 2011.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Use of Estimates</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during that reporting period. Areas that require the use
of significant management estimates include revenue recognition, inventory obsolescence and bad
debt reserves, accruals for warranty expenses, income taxes and certain equity transactions.
Accordingly, actual results could differ from those estimates.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Cash and cash equivalents</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company considers all highly liquid, short-term investments with original maturities of
three months or less to be cash equivalents.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Short-term investments</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The amortized cost and fair value of short-term investments, with gross unrealized gains and
losses, as of March 31, 2011 and June 30, 2011 were as follows (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="22" style="border-bottom: 1px solid #000000"><b>March 31, 2011</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Amortized</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Unrealized</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Unrealized</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Cash and Cash</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Short Term</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Cost</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Gains</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Losses</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Fair Value</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Equivalents</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Investments</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Money market funds
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">485</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">485</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">485</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Bank certificate of deposit
</div></td>
<td> </td>
<td> </td>
<td align="right">1,011</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,011</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,011</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,496</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,496</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">485</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,011</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="22" style="border-bottom: 1px solid #000000"><b>June 30, 2011</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Amortized</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Unrealized</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Unrealized</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Cash and Cash</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Short Term</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Cost</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Gains</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Losses</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Fair Value</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Equivalents</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Investments</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Money market funds
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">485</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">485</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">485</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Bank certificate of deposit
</div></td>
<td> </td>
<td> </td>
<td align="right">1,012</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,012</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,012</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,497</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,497</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">485</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,012</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of March 31, 2011 and June 30, 2011, the Company’s financial assets described in the table
above were measured at fair value on a recurring basis employing quoted prices in active markets
for identical assets (level 1 inputs).
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company’s certificate of deposit is pledged as security for an equipment lease.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Fair value of financial instruments</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The carrying amounts of the Company’s financial instruments, which include cash and cash
equivalents, investments, accounts receivable, and accounts payable, approximate their respective
fair values due to the relatively short-term nature of these instruments. Based upon interest rates
currently available to the Company for debt with similar terms, the carrying value of the Company’s
long-term debt is also approximately equal to its fair value. Valuation techniques used to measure
fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.
GAAP describes a fair value hierarchy based on the following three levels of inputs, of which the
first two are considered observable and the last unobservable, that may be used to measure fair
value:
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Level 1 — Valuations are based on unadjusted quoted prices in active markets for identical
assets or liabilities.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Level 2 — Valuations are based on quoted prices for similar assets or liabilities in active
markets, or quoted prices in markets that are not active for which significant inputs are
observable, either directly or indirectly.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Level 3 — Valuations are based on prices or valuation techniques that require inputs that are
both unobservable and significant to the overall fair value measurement. Inputs reflect
management’s best estimate of what market participants would use in valuing the asset or liability
at the measurement date.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Accounts receivable</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The majority of the Company’s accounts receivable are due from companies in the commercial,
industrial and agricultural industries, as well as from wholesalers. Credit is extended based on an
evaluation of a customer’s financial condition. Generally, collateral is not required for end
users; however, the payment of certain trade accounts receivable from wholesalers is secured by
irrevocable standby letters of credit. Accounts receivable are generally due within 30-60 days.
Accounts receivable are stated at the amount the Company expects to collect from outstanding
balances. The Company provides for probable uncollectible amounts through a charge to earnings and
a credit to an allowance for doubtful accounts based on its assessment of the current status of
individual accounts. Balances that are still outstanding after the Company has used reasonable
collection efforts are written off through a charge to the allowance for doubtful accounts and a
credit to accounts receivable.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Financing receivables</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company considers its lease balances included in consolidated current and long-term
accounts receivable from its Orion Throughput Agreement, or OTA, sales-type leases to be financing
receivables. Additional disclosures on the credit quality of the Company’s sold OTA sales-type
leases and lease balances included in accounts receivable are as follows:
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Aging Analysis as of June 30, 2011 (in thousands):</i>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="30%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Greater</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Not Past</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>1-90 days</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>than 90 days</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Total sales-type</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Due</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>past due</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>past due</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Total past due</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>leases</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Lease balances included
in consolidated accounts
receivable — current
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,811</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">86</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">7</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">93</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,904</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Lease balances included in
consolidated accounts
receivable — long-term
</div></td>
<td> </td>
<td> </td>
<td align="right">5,534</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,534</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total gross sales-type leases
</div></td>
<td> </td>
<td> </td>
<td align="right">7,345</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">86</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">93</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,438</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Allowance
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(2</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(2</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(2</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total net sales-type leases
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">7,345</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">86</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">5</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">91</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">7,436</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Allowance for credit losses</i>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company’s allowance for credit losses is based on management’s assessment of the collectability
of customer accounts. A considerable amount of judgment is required in order to make this
assessment, including a detailed analysis of the aging of the lease receivables and the current
credit worthiness of the Company’s customers and an analysis of historical bad debts and other
adjustments. If there is a deterioration of a major customer’s credit worthiness or if actual
defaults are higher than historical experience, the estimate of the recoverability of amounts due
could be adversely affected. The Company reviews in detail the allowance for doubtful accounts on a
quarterly basis and adjusts the allowance estimate to reflect actual portfolio performance and any
changes in future portfolio performance expectations. The Company did not incur any provision
write-offs or credit losses against its OTA sales-type lease receivable balances in either fiscal
2011 or for the quarter ended June 30, 2011.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Inventories</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Inventories consist of raw materials and components, such as ballasts, metal sheet and coil
stock and molded parts; work in process inventories, such as frames and reflectors; and finished
goods, including completed fixtures and systems, and wireless energy management systems and
accessories, such as lamps, meters and power supplies. All inventories are stated at the lower of
cost or market value with cost determined using the first-in, first-out (FIFO) method. The Company
reduces the carrying value of its inventories for differences between the cost and estimated net
realizable value, taking into consideration usage in the preceding 12 months, expected demand, and
other information indicating obsolescence. The Company records as a charge to cost of product
revenue the amount required to reduce the carrying value of inventory to net realizable value. As
of March 31, 2011 and June 30, 2011, the Company had inventory obsolescence reserves of $811,000
and $811,000.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Costs associated with the procurement and warehousing of inventories, such as inbound freight
charges and purchasing and receiving costs, are also included in cost of product revenue.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Inventories were comprised of the following (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>March 31,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Raw materials and components
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">12,005</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">12,343</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Work in process
</div></td>
<td> </td>
<td> </td>
<td align="right">459</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">972</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Finished goods
</div></td>
<td> </td>
<td> </td>
<td align="right">17,043</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18,859</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">29,507</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">32,174</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Prepaid Expenses and Other Current Assets</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Prepaid expenses and other current assets consist primarily of deferred costs related to
in-process OTA projects, prepaid insurance premiums, prepaid license fees, purchase deposits,
advance payments to contractors, advance commission payments and miscellaneous receivables.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Property and Equipment</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Property and equipment were comprised of the following (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>March 31,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Land and land improvements
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,474</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,474</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Buildings
</div></td>
<td> </td>
<td> </td>
<td align="right">15,104</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,161</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Furniture, fixtures and office equipment
</div></td>
<td> </td>
<td> </td>
<td align="right">8,323</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10,081</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Leasehold improvements
</div></td>
<td> </td>
<td> </td>
<td align="right">9</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">44</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Equipment leased to customers under Power
Purchase Agreements
</div></td>
<td> </td>
<td> </td>
<td align="right">4,994</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,997</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Plant equipment
</div></td>
<td> </td>
<td> </td>
<td align="right">8,067</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,217</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Construction in progress
</div></td>
<td> </td>
<td> </td>
<td align="right">2,272</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,251</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right">40,243</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">41,225</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Less: accumulated depreciation and amortization
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(10,226</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(11,099</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net property and equipment
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">30,017</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">30,126</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Depreciation is provided over the estimated useful lives of the respective assets, using the
straight-line method. Depreciable lives by asset category are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="59%"> </td>
<td width="1%"> </td>
<td width="40%"> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Land improvements
</div></td>
<td> </td>
<td align="left" valign="bottom">10 — 15 years</td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Buildings
</div></td>
<td> </td>
<td align="left" valign="bottom">10 — 39 years</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Leasehold improvements
</div></td>
<td> </td>
<td align="left" valign="bottom">Shorter of asset life or life of lease</td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Furniture, fixtures and office equipment
</div></td>
<td> </td>
<td align="left" valign="bottom">2 — 10 years</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Plant equipment
</div></td>
<td> </td>
<td align="left" valign="bottom">3 — 10 years</td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Patents and Licenses</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Patents and licenses are amortized over their estimated useful life, ranging from 7 to 17
years, using the straight line method.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Long-Term Receivables</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company records a long-term receivable for the non-current portion of its sales-type
capital lease OTA contracts. The receivable is recorded at the net present value of the future cash
flows from scheduled customer payments. The Company uses the implied cost of capital from each
individual contract as the discount rate. Long-term receivables from OTA contracts were $5.5
million as of June 30, 2011.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Also included in other long-term receivables are amounts due from a third party finance
company to which the Company has sold, without recourse, the future cash flows from OTAs entered
into with customers. Such receivables are recorded at the present value of the future cash flows
discounted at 11%. As of June 30, 2011, the following amounts were due from the third party finance
company in future periods (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="86%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Fiscal 2013
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">955</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Fiscal 2014
</div></td>
<td> </td>
<td> </td>
<td align="right">993</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Fiscal 2015
</div></td>
<td> </td>
<td> </td>
<td align="right">936</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Fiscal 2016
</div></td>
<td> </td>
<td> </td>
<td align="right">292</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total gross long-term receivable
</div></td>
<td> </td>
<td> </td>
<td align="right">3,176</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Less: amount representing interest
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(744</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net long-term receivable
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">2,432</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Other Long-Term Assets</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Other long-term assets include long-term security deposits, prepaid licensing costs and
deferred financing costs. Other long-term assets include $55,000 and $61,000 of deferred financing
costs as of March 31, 2011 and June 30, 2011. Deferred financing costs related to debt issuances
are amortized to interest expense over the life of the related debt issue (2 to 15 years).
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Accrued Expenses</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Accrued expenses include warranty accruals, accrued wages and benefits, accrued vacation,
sales tax payable and other various unpaid expenses. No accrued expenses exceeded 5% of current
liabilities as of either March 31, 2011, or June 30, 2011.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company generally offers a limited warranty of one year on its products in addition to
those standard warranties offered by major original equipment component manufacturers. The
manufacturers’ warranties cover lamps and ballasts, which are significant components in the
Company’s products.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Changes in the Company’s warranty accrual were as follows (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three Months Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Beginning of period
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">60</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">59</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision to cost of product revenue
</div></td>
<td> </td>
<td> </td>
<td align="right">48</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">31</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Charges
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(49</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(31</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">End of period
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">59</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">59</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Revenue Recognition</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company offers a financing program, called an OTA, for a customer’s lease of the Company’s
energy management systems. The OTA is structured as a sales-type capital lease and upon successful
installation of the system and customer acknowledgement that the system is operating as specified,
product revenue is recognized at the Company’s net investment in the lease, which typically is the
net present value of the future cash flows.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company offers a separate program, called a power purchase agreement, or PPA, for the
Company’s renewable energy product offerings. A PPA is a supply side agreement for the generation
of electricity and subsequent sale to the end user. Upon the customer’s acknowledgement that the
system is operating as specified, product revenue is recognized on a monthly basis over the life of
the PPA contract, typically in excess of 10 years.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Other than for OTA and PPA sales, revenue is recognized when the following four criteria are
met:
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">persuasive evidence of an arrangement exists;
</div></td>
</tr>
<tr>
<td style="font-size: 8pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">delivery has occurred and title has passed to the customer;
</div></td>
</tr>
<tr>
<td style="font-size: 8pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">the sales price is fixed and determinable and no further obligation exists; and
</div></td>
</tr>
<tr>
<td style="font-size: 8pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">collectability is reasonably assured
</div></td>
</tr>
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">These four criteria are met for the Company’s product-only revenue upon delivery of the
product and title passing to the customer.
At that time, the Company provides for estimated costs that may be incurred for product
warranties and sales returns. Revenues are presented net of sales tax and other sales related
taxes.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">For sales contracts consisting of multiple elements of revenue, such as a combination of
product sales and services, the Company determines revenue by allocating the total contract revenue
to each element based on their relative selling prices. In such circumstances, the Company uses a
hierarchy to determine the selling price to be used for allocating revenue to deliverables: (1)
vendor-specific objective evidence (VSOE) of fair value, if available, (2) third-party evidence
(TPE) of selling price if VSOE is not available, and (3) best estimate of the selling price if
neither VSOE nor TPE is available (a description as to how the Company determined VSOE, TPE and
estimated selling price is provided below).
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The nature of the Company’s multiple element arrangements is similar to a construction
project, with materials being delivered and contracting and project management activities occurring
according to an installation schedule. The significant deliverables include the shipment of
products and related transfer of title and the installation.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">To determine the selling price in multiple-element arrangements, the Company established VSOE
of the selling price for its HIF lighting and energy management system products using the price
charged for a deliverable when sold separately. In addition, the Company records in service revenue
the selling price for its installation and recycling services using management’s best estimate of
selling price, as VSOE or TPE evidence does not exist. Service revenue is recognized when services
are completed and customer acceptance has been received. Recycling services provided in connection
with installation entail the disposal of the customer’s legacy lighting fixtures. The Company’s
service revenues, other than for installation and recycling that are completed prior to delivery of
the product, are included in product revenue using management’s best estimate of selling price, as
VSOE or TPE evidence does not exist. These services include comprehensive site assessment, site
field verification, utility incentive and government subsidy management, engineering design, and
project management. For these services and for installation and recycling services, management’s
best estimate of selling price is determined by considering several external and internal factors
including, but not limited to, pricing practices, margin objectives, competition, geographies in
which the Company offers its products and services and internal costs. The determination of
estimated selling price is made through consultation with and approval by management, taking into
account all of the preceding factors.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">To determine the selling price for solar renewable product and services sold through the
Company’s Engineered Systems division, the Company uses management’s best estimate of selling price
giving consideration to external and internal factors including, but not limited to, pricing
practices, margin objectives, competition, scope and size of individual projects, geographies in
which the Company offers its products and services and internal costs. The Company has completed a
limited number of renewable project sales and accordingly, does not have sufficient VSOE or TPE
evidence.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Costs of products delivered, and services performed, that are subject to additional
performance obligations or customer acceptance are deferred and recorded in prepaid expenses and
other current assets on the Consolidated Balance Sheet. These deferred costs are expensed at the
time the related revenue is recognized. Deferred costs amounted to $773,000 and $648,000 as of
March 31, 2011 and June 30, 2011.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Deferred revenue relates to advance customer billings, investment tax grants received related
to PPAs and a separate obligation to provide maintenance on OTAs, and is classified as a liability
on the Consolidated Balance Sheet. The fair value of the maintenance is readily determinable based
upon pricing from third-party vendors. Deferred revenue related to maintenance services is
recognized when the services are delivered, which occurs in excess of a year after the original OTA
is executed.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Deferred revenue was comprised of the following (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>March 31,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Deferred revenue — current liability
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">262</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,242</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Deferred revenue — long term liability
</div></td>
<td> </td>
<td> </td>
<td align="right">1,777</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,665</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total deferred revenue
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">2,039</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,907</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Income Taxes</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company recognizes deferred tax assets and liabilities for the future tax consequences of
temporary differences between
financial reporting and income tax basis of assets and liabilities, measured using the
enacted tax rates and laws expected to be in effect when the temporary differences reverse.
Deferred income taxes also arise from the future tax benefits of operating loss and tax credit
carryforwards. A valuation allowance is established when management determines that it is more
likely than not that all or a portion of a deferred tax asset will not be realized.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">ASC 740, <i>Income Taxes</i>, also prescribes a recognition threshold and measurement attribute for
the financial statement recognition and measurement of tax positions taken or expected to be taken
in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not
to be sustained upon examination. The Company has classified the amounts recorded for uncertain tax
benefits in the balance sheet as other liabilities (non-current) to the extent that payment is not
anticipated within one year. The Company recognizes penalties and interest related to uncertain tax
liabilities in income tax expense. Penalties and interest are immaterial and are included in the
unrecognized tax benefits.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Deferred tax benefits have not been recognized for income tax effects resulting from the
exercise of non-qualified stock options. These benefits will be recognized in the period in which
the benefits are realized as a reduction in taxes payable and an increase in additional paid-in
capital. For the three months ended June 30, 2010 and 2011, there were none and $0.2 million
realized tax benefits from the exercise of stock options.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Stock Option Plans</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The fair value of each option grant, excluding performance stock options, for the three months
ended June 30, 2010 and June 30, 2011 was determined using the assumptions in the following table:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Three Months Ended June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted average expected term
</div></td>
<td> </td>
<td colspan="2" align="right">5.7 years</td>
<td> </td>
<td> </td>
<td colspan="2" align="right">5.4 years</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Risk-free interest rate
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">2.25</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">1.89</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected volatility
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">60</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">58.4</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected forfeiture rate
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">10</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">11.4</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected dividend yield
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">0</td>
<td nowrap="nowrap">%</td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Net Loss per Common Share</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Basic net loss per common share is computed by dividing net loss attributable to common
shareholders by the weighted-average number of common shares outstanding for the period and does
not consider common stock equivalents.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Diluted net loss per common share reflects the dilution that would occur if warrants and
employee stock options were exercised. In the computation of diluted net income per common share,
the Company uses the “treasury stock” method for outstanding options and warrants. Diluted net loss
per common share is the same as basic net loss per common share for the periods ended June 30, 2010
and June 30, 2011, because the effects of potentially dilutive securities are anti-dilutive. The
effect of net loss per common share is calculated based upon the following shares (in thousands
except share amounts):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Three Months Ended June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td align="center" colspan="2" nowrap="nowrap"></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Numerator:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net loss (in thousands)
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(536</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(219</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Denominator:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted-average common shares outstanding
</div></td>
<td> </td>
<td> </td>
<td align="right">22,523,107</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">22,921,436</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted-average effect of assumed conversion
of stock options and warrants
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted-average common shares and common share
equivalents outstanding
</div></td>
<td> </td>
<td> </td>
<td align="right">22,523,107</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">22,921,436</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income (loss) per common share:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Basic
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(0.02</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(0.01</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Diluted
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(0.02</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(0.01</td>
<td nowrap="nowrap">)</td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following table indicates the number of potentially dilutive securities as of the end of
each period:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Common stock options
</div></td>
<td> </td>
<td> </td>
<td align="right">3,769,282</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,266,586</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Common stock warrants
</div></td>
<td> </td>
<td> </td>
<td align="right">76,240</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">38,980</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td> </td>
<td align="right">3,845,522</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,305,566</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Concentration of Credit Risk and Other Risks and Uncertainties</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company currently depends on one supplier for a number of components necessary for its
products, including ballasts and lamps. If the supply of these components were to be disrupted or
terminated, or if this supplier were unable to supply the quantities of components required, the
Company may have short-term difficulty in locating alternative suppliers at required volumes.
Purchases from this supplier accounted for 27% and 11% of total cost of revenue for the three
months ended June 30, 2010 and June 30, 2011, respectively.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company currently purchases a majority of its solar panels from one supplier for its sales
of solar generating systems through its Orion Engineered Systems Division. The Company does have
alternative vendor sources for its sale of PV solar generating systems. Purchases from this
supplier accounted for 12% and 33% of total cost or revenue for the three months ended June 30,
2010 and June 30, 2011, respectively.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">For the three months ended June 30, 2010, no customer accounted for more than 10% of revenue.
For the three months ended June 30, 2011, two customers accounted for more than 10% of revenue.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of March 31, 2011, and June 30, 2011, one customer accounted for 16% and 11% of accounts
receivable, respectively.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Recent Accounting Pronouncements</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In July 2010, the FASB issued Accounting Standards Update 2010-20, <i>Disclosures about the
Credit Quality of Financing Receivables and the Allowance for Credit Losses </i>(ASU 2010-20). ASU
2010-20 requires further disaggregated disclosures that improve financial statement users’
understanding of (1) the nature of an entity’s credit risk associated with its financing
receivables and (2) the entity’s assessment of that risk in estimating its allowance for credit
losses as well as changes in the allowance and the reasons for those changes. The new and amended
disclosures as of the end of a reporting period are effective for interim and annual reporting
periods ending on or after December 15, 2010. The adoption of ASU 2010-20 did not have a
significant impact on the Company’s consolidated financial statements.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In April, 2011, the FASB issued ASU No. 2011-03 <i>Transfers and Servicing (Topic 860):
Reconsideration of Effective Control for Repurchase Agreements </i>(“ASU 2011-03”). ASU No. 2011-03
affects all entities that enter into agreements to transfer financial assets that both entitle and
obligate the transferor to repurchase or redeem the financial assets before their maturity. The
amendments in ASU 2011-03 remove from the assessment of effective control the criterion relating to
the transferor’s ability to repurchase or redeem financial assets on substantially the agreed
terms, even in the event of default by the transferee. ASU 2011-03 also eliminates the requirement
to demonstrate that the transferor possesses adequate collateral to fund substantially all the cost
of purchasing replacement financial assets. The guidance is effective for the Company’s reporting
period ended March 31, 2012. ASU 2011-03 is required to be applied prospectively to transactions or
modifications of existing transaction that occur on or after January 1, 2012. The
Company does not expect that the adoption of ASU 2011-03 will have a significant impact on the
Company’s consolidated financial statements.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In May 2011, the FASB issued ASU No. 2011-04 <i>Fair Value Measurements (Topic 820): Amendments
to Achieve Common Fair Value Measurement and Disclosure Requirements in US GAAP and International
Financial Reporting Standards (“IFRS”) </i>(“ASU 2011-04”). ASU 2011-04 represents the converged
guidance of the FASB and the IASB (the “Boards”) on fair value measurements. The collective
efforts of the Boards and their staffs, reflected in ASU 2011-04, have resulted in common
requirements for measuring fair value and for disclosing information about fair value measurements,
including a consistent meaning of the term “fair value.” The Boards have concluded the common
requirements will result in greater comparability of fair value measurements presented and
disclosed in financial statements prepared in accordance with GAAP and IFRSs. The amendments in
this ASU are required to be applied prospectively, and are effective for interim and annual periods
beginning after December 15, 2011. The Company does not expect that the adoption of ASU 2011-04
will have a significant impact on the Company’s consolidated financial statements.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In June 2011, the FASB issued ASU No. 2011-05, “<i>Comprehensive Income (ASC Topic 220):
Presentation of Comprehensive Income,</i>” (“ASU 2011-05”) which amends current comprehensive income
guidance. This accounting update eliminates the option to present the components of other
comprehensive income as part of the statement of shareholders’ equity. Instead, the Company must
report comprehensive income in either a single continuous statement of comprehensive income which
contains two sections, net income and other comprehensive income, or in two separate but
consecutive statements. ASU 2011-05 will be effective for public companies during the interim and
annual periods beginning after December 15, 2011 with early adoption permitted. The adoption of
ASU 2011-05 will not have a significant impact on the Company’s consolidated statements as it only
requires a change in the format of the current presentation.
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>NOTE C — RELATED PARTY TRANSACTIONS</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During the three months ended June 30, 2010 and June 30, 2011, the Company recorded revenue of
$3,000 and $0 for products and services sold to an entity for which a director of the Company was
formerly the executive chairman. The terms and conditions of such relationship are believed to be
not materially more favorable to the Company or the entity than could be obtained from an
independent third party.
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>NOTE D — LONG-TERM DEBT</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Long-term debt as of March 31, 2011 and June 30, 2011 consisted of the following (in
thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>March 31,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Term note
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">782</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">721</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Customer equipment finance notes payable
</div></td>
<td> </td>
<td> </td>
<td align="right">1,793</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,518</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">First mortgage note payable
</div></td>
<td> </td>
<td> </td>
<td align="right">853</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">834</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Debenture payable
</div></td>
<td> </td>
<td> </td>
<td align="right">807</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">797</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other long-term debt
</div></td>
<td> </td>
<td> </td>
<td align="right">1,127</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,061</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total long-term debt
</div></td>
<td> </td>
<td> </td>
<td align="right">5,362</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,931</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Less current maturities
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,137</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,855</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Long-term debt, less current maturities
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">4,225</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">6,076</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>New Debt Arrangements</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In June 2011, the Company entered into a note agreement with a financial institution that
provided the Company with $2.8 million to fund completed customer contracts under the Company’s OTA
finance program. The note is collateralized by the OTA-related equipment and the expected future
monthly payments under the supporting 46 individual OTA contracts. The note bears interest at 7.85%
and matures in March 2016 and is included in the customer equipment finance notes payable line in
the table above. The note agreement includes a debt service covenant with respect to the supporting
OTA contracts that the aggregate amount of all remaining scheduled payments due with respect to the
individual OTA contracts be not less than 1.25 to 1.0 of the remaining principal and interest
payments due under the loan. As of June 30, 2011 the Company was in compliance with the debt
service covenant.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Revolving Credit Agreement</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On June 30, 2010, the Company entered into a new credit agreement (Credit Agreement) with JP
Morgan Chase Bank, N.A. (JP Morgan). The Credit Agreement replaced the Company’s former credit
agreement with a different bank.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Credit Agreement provides for a revolving credit facility (Credit Facility) that matures
on June 30, 2012. Borrowings under the Credit Facility are limited to (i) $15.0 million or (ii)
during periods in which the outstanding principal balance of outstanding loans under the Credit
Facility is greater than $5.0 million, the lesser of (A) $15.0 million or (B) the sum of 75% of the
outstanding principal balance of certain accounts receivable of the Company and 45% of certain
inventory of the Company. The Credit Agreement contains certain financial covenants, including
minimum unencumbered liquidity requirements and requirements that the Company maintain a total
liabilities to tangible net worth ratio not to exceed 0.50 to 1.00 as of the last day of any fiscal
quarter. The Credit Agreement also contains certain restrictions on the ability of the Company to
make capital or lease expenditures over prescribed limits, incur additional indebtedness,
consolidate or merge, guarantee obligations of third parties, make loans or advances, declare or
pay any dividend or distribution on its stock, redeem or repurchase shares of its stock or pledge
assets. The Company also may cause JP Morgan to issue letters of credit for the Company’s account
in the aggregate principal amount of up to $2.0 million, with the dollar amount of each issued
letter of credit counting against the overall limit on borrowings under the Credit Facility. As of
June 30, 2011, the Company had outstanding letters of credit totaling $1.7 million, primarily for
securing collateral requirements under equipment operating leases. In fiscal 2011, the Company
incurred $57,000 of total deferred financing costs related to the Credit Agreement which is being
amortized over the two-year term of the Credit Agreement. There were no borrowings by the Company
under the Credit Agreement as of March 31, 2011 or June 30, 2011. The Company was in compliance
with all of its covenants under the Credit Agreement as of June 30, 2011.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Credit Agreement is secured by a first lien security interest in the Company’s accounts
receivable, inventory and general intangibles, and a second lien priority in the Company’s
equipment and fixtures. All OTAs, PPAs, leases, supply agreements and/or similar agreements
relating to solar PV and wind turbine systems or facilities, as well as all accounts receivable and
assets of the Company related to the foregoing, are excluded from these liens.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company must pay a fee of 0.25% on the average daily unused amount of the Credit Facility
and a fee of 2.00% on the daily average face amount of undrawn issued letters of credit. The fee on
unused amounts is waived if the Company or its affiliates maintain funds on deposit with JP Morgan
or its affiliates above a specified amount. The deposit threshold requirement was not met as of
June 30, 2011.
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>NOTE E — INCOME TAXES</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The income tax provision for the three months ended June 30, 2011 was determined by applying
an estimated annual effective tax rate of (39.8)% to income before taxes. The estimated effective
income tax rate was determined by applying statutory tax rates to pretax income adjusted for
certain permanent book to tax differences and tax credits.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Below is a reconciliation of the statutory federal income tax rate and the effective income
tax rate:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Three Months Ended June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Statutory federal tax rate
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(34.0</td>
<td nowrap="nowrap">)%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(34.0</td>
<td nowrap="nowrap">)%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">State taxes, net
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(6.1</td>
<td nowrap="nowrap">)%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(5.1</td>
<td nowrap="nowrap">)%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Stock-based compensation expense
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(15.4</td>
<td nowrap="nowrap">)%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(0.9</td>
<td nowrap="nowrap">)%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Federal tax credit
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">5.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">2.0</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Permanent items
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(3.7</td>
<td nowrap="nowrap">)%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(0.6</td>
<td nowrap="nowrap">)%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Change in valuation reserve
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(7.5</td>
<td nowrap="nowrap">)%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">0.0</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other, net
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">0.1</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1.2</td>
<td nowrap="nowrap">)%</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Effective income tax rate
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(60.8</td>
<td nowrap="nowrap">)%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(39.8</td>
<td nowrap="nowrap">)%</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company is eligible for tax benefits associated with the excess of the tax deduction
available for exercises of non-qualified stock options, or NQSOs, over the amount recorded at
grant. The amount of the benefit is based on the ultimate deduction reflected in the applicable
income tax return. Benefits of $0.5 million were recorded in fiscal 2011 as a reduction in taxes
payable and a credit to additional paid in capital based on the amount that was utilized during the
year. Benefits of $0.2 million were recorded for the period ended June 30, 2011.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During fiscal 2011, the Company converted almost all of its existing incentive
stock options, or ISOs, to NQSOs. This conversion was applied retrospectively, allowing the Company
to benefit by reducing $0.6 million of income tax expense during fiscal 2011 related to
non-deductible ISO stock compensation expense that was previously deferred for income tax purposes.
The conversion will greatly reduce the impact of stock-based compensation expense on the effective
tax rate in the table above. Since July 30, 2008, all stock option grants have been issued as
NQSOs.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of June 30, 2011, the Company had federal net operating loss carryforwards of
approximately $8.0 million, of which $4.8 million are associated with the exercise of NQSOs that
have not yet been recognized by the Company in its financial statements. The Company also has state
net operating loss carryforwards of approximately $4.7 million, of which $2.5 million are
associated with the exercise of NQSOs. The Company also has federal tax credit carryforwards of
approximately $1.0 million and state tax credits of $0.6 million. A full valuation allowance has
been set up for the state tax credits due to the state apportioned income and the potential
expiration of the state tax credits due to the carry forward period. These federal and state net
operating losses and credit carryforwards are available, subject to the discussion in the following
paragraph, to offset future taxable income and, if not utilized, will begin to expire in varying
amounts between 2014 — 2030.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In 2007, the Company’s past issuances and transfers of stock caused an ownership change. As a
result, the Company’s ability to use its net operating loss carryforwards, attributable to the
period prior to such ownership change, to offset taxable income will be subject to limitations in a
particular year, which could potentially result in increased future tax liability for the Company.
The Company does not believe the ownership change affects the use of the full amount of the net
operating loss carryforwards.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of June 30, 2011, the Company’s U.S. federal income tax returns for tax years 2009 to 2011
remain subject to examination. The Company has various federal income tax return positions in the
process of examination for 2009 and 2010. The Company currently believes that the ultimate
resolution of these matters, individually or in the aggregate, will not have a material effect on
its business, financial condition, results of operations or liquidity.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Uncertain tax positions</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of June 30, 2011, the balance of gross unrecognized tax benefits was approximately $0.4
million, all of which would reduce the Company’s effective tax rate if recognized. The Company
does not expect this amount to change in the next 12 months as none of the issues are currently
under examination, the statutes of limitations do not expire within the period, and the Company is
not aware of any pending litigation. Due to the existence of net operating loss and credit
carryforwards, all years since 2002 are open to examination by tax authorities.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company has classified the amounts recorded for uncertain tax benefits in the balance
sheet as other liabilities (non-current) to the extent that payment is not anticipated within one
year. The Company recognizes penalties and interest related to uncertain tax liabilities in income
tax expense. Penalties and interest are immaterial as of the date of adoption and are included in
the unrecognized tax benefits. For the three months ended June 30, 2010 and 2011, the Company had
the following unrecognized tax benefit activity (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Three Months Ended</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Three Months Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>June 30, 2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>June 30, 2011</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Unrecognized tax benefits as of beginning of period
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">398</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">399</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Decreases relating to settlements with tax authorities
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Additions based on tax positions related to the current period positions
</div></td>
<td> </td>
<td> </td>
<td align="right">1</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Unrecognized tax benefits as of end of period
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">399</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">400</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>NOTE F — COMMITMENTS AND CONTINGENCIES </b><br />
<br />
<b><i>Operating Leases and Purchase Commitments</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company leases vehicles and equipment under operating leases. Rent expense under operating
leases was $413,000 and $529,000 for the three months ended June 30, 2010 and June 30, 2011. The
Company enters into non-cancellable purchase commitments for certain inventory items in order to
secure better pricing and ensure sufficient materials on hand to meet anticipated order volume and
customer expectations, as well as for capital expenditures. As of June 30, 2011, the Company had
entered into $14.4 million of purchase commitments related to fiscal 2012, including $1.7 million
for operating lease commitments and $12.7 million for
inventory purchase commitments.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Litigation</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In February and March 2008, three class action lawsuits were filed in the United States
District Court for the Southern District of New York against the Company, several of its officers,
all members of its then existing board of directors, and certain underwriters relating to the
Company’s December 2007 initial public offering (IPO). The plaintiffs claimed to represent those
persons who purchased shares of the Company’s common stock from December 18, 2007 through February
6, 2008. The plaintiffs alleged, among other things, that the defendants made misstatements and
failed to disclose material information in the Company’s IPO registration statement and prospectus.
The complaints alleged various claims under the Securities Act of 1933, as amended. The complaints
sought, among other relief, class certification, unspecified damages, fees, and such other relief
as the court may deem just and proper.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On August 1, 2008, the court-appointed lead plaintiff filed a consolidated amended complaint
in the United States District Court for the Southern District of New York. On September 15, 2008,
the Company and the other director and officer defendants filed a motion to dismiss the
consolidated complaint, and the underwriters filed a separate motion to dismiss the consolidated
complaint on January 16, 2009. After oral argument on August 19, 2009, the court granted in part
and denied in part the motions to dismiss. The plaintiff filed a second consolidated amended
complaint on September 4, 2009, and the defendants filed an answer to the complaint on October 9,
2009.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In the fourth quarter of fiscal 2010, the Company reached a preliminary agreement to settle
the class action lawsuits and on January 3, 2011, the court issued an order granting preliminary
approval of the settlement. After a fairness hearing on April 14, 2011, the court approved the
settlement in a final judgment and order. No shareholder appeared at the hearing to object.
Accordingly, the case has concluded. Of the final settlement amount of $3.25 million, the Company
contributed $0.49 million and the its insurer contributed $2.76 million. The Company recorded the
settlement charge in the fourth quarter of fiscal 2010.
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>NOTE G — SHAREHOLDERS’ EQUITY </b><br />
<br />
<b><i>Shareholder Rights Plan</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On January 7, 2009, the Company’s Board of Directors adopted a shareholder rights plan and
declared a dividend distribution of one common share purchase right (a “Right”) for each
outstanding share of the Company’s common stock. The issuance date for the distribution of the
Rights was February 15, 2009 to shareholders of record on February 1, 2009. Each Right entitles the
registered holder to purchase from the Company one share of the Company’s common stock at a price
of $30.00 per share, subject to adjustment (the “Purchase Price”).
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Rights will not be exercisable (and will be transferable only with the Company’s common
stock) until a “Distribution Date” occurs (or the Rights are earlier redeemed or expire). A
Distribution Date generally will occur on the earlier of a public announcement that a person or
group of affiliated or associated persons (an “Acquiring Person”) has acquired beneficial ownership
of 20% or more of the Company’s outstanding common stock (a “Shares Acquisition Date”) or 10
business days after the commencement of, or the announcement of an intention to make, a tender
offer or exchange offer that would result in any such person or group of persons acquiring such
beneficial ownership.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">If a person becomes an Acquiring Person, holders of Rights (except as otherwise provided in
the shareholder rights plan) will have the right to receive that number of shares of the Company’s
common stock having a market value of two times the then-current Purchase Price, and all Rights
beneficially owned by an Acquiring Person, or by certain related parties or transferees, will be
null and void. If, after a Shares Acquisition Date, the Company is acquired in a merger or other
business combination transaction or 50% or more of its consolidated assets or earning power are
sold, proper provision will be made so that each holder of a Right (except as otherwise provided in
the shareholder rights plan) will thereafter have the right to receive that number of shares of the
acquiring company’s common stock which at the time of such transaction will have a market value of
two times the then-current Purchase Price.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Until a Right is exercised, the holder thereof, as such, will have no rights as a shareholder
of the Company. At any time prior to a person becoming an Acquiring Person, the Board of
Directors of the Company may redeem the Rights in whole, but not in part, at a price of $0.001 per
Right. Unless they are extended or earlier redeemed or exchanged, the Rights will expire on January
7, 2019.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Employee Stock Purchase Plan</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In August 2010, the Company’s board of directors approved a non-compensatory employee stock
purchase plan, or ESPP. The
ESPP authorizes 2,500,000 million shares to be issued from treasury or authorized shares to satisfy
employee share purchases under the ESPP. All full-time employees of the Company are eligible to be
granted a non-transferable purchase right each calendar quarter to purchase directly from the
Company up to $20,000 of the Company’s common stock at a purchase price equal to 100% of the
closing sale price of the Company’s common stock on the NYSE Amex exchange on the last trading day
of each quarter. The ESPP allows for employee loans from the Company, except for Section 16
officers, limited to 20% of an individual’s annual income and no more than $250,000 outstanding at
any one time. Interest on the loans is charged at the 10-year loan IRS rate and is payable at the
end of each calendar year or upon loan maturity. The loans are secured by a pledge of any and all
the Company’s shares purchased by the participant under the ESPP and the Company has full recourse
against the employee, including offset against compensation payable. The Company had the following
shares issued from treasury during fiscal 2011 and for the three months ended June 30, 2011:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="30%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Shares Issued</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Shares Issued</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Under ESPP</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Closing Market</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Under Loan</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Dollar Value of</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Repayment of</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Plan</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Price</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Program</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Loans Issued</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Loans</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Fiscal Year Ended
March 31, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">65,776</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3.37</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">58,655</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">196,100</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,685</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Quarter Ended June 30, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">9,788</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3.93</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,601</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">33,800</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,649</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td> </td>
<td align="right">75,564</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3.45</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">67,256</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">229,900</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">4,334</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Loans issued to employees are reflected on the Company’s balance sheet as a contra-equity account.
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>NOTE H — STOCK OPTIONS AND WARRANTS</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company grants stock options under its 2003 Stock Option and 2004 Stock and Incentive
Awards Plans (the Plans). Under the terms of the Plans, the Company has reserved 12,000,000 shares
for issuance to key employees, consultants and directors. The Company’s board of directors approved
an increase to the number of shares available under the 2004 Stock and Incentive Awards Plan of
1,500,000 shares, and such share increase was approved by the Company’s shareholders at the 2010
annual shareholders meeting and such shares are included above, other than as described below. The
options generally vest and become exercisable ratably between one month and five years although
longer vesting periods have been used in certain circumstances. Exercisability of the options
granted to employees are contingent on the employees’ continued employment and non-vested options
are subject to forfeiture if employment terminates for any reason. Options under the Plans have a
maximum life of 10 years. In the past, the Company has granted both ISOs and NQSOs, although in
July 2008, the Company adopted a policy of thereafter only granting NQSOs. Restricted stock awards
have no vesting period and have been issued to certain non-employee directors in lieu of cash
compensation pursuant to elections made under the Company’s non-employee director compensation
program. The Plans also provide to certain employees accelerated vesting in the event of certain
changes of control of the Company as well as under other special circumstances.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In fiscal 2011, the Company converted all of its existing ISO awards to NQSO awards. No
consideration was given to the employees for their voluntary conversion of ISO awards.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company granted the accelerated vesting stock options in May 2011 under its 2004 Stock and
Incentive Awards to provide an opportunity for its named executive officers to earn long-term
equity incentive awards based on the Company’s financial performance for fiscal 2012. An aggregate
of 459,041 stock options were granted on the third business day following the Company’s public
release of its fiscal 2011 results at an exercise price per share of $4.19, which was the closing
sale price of the Company’s Common Stock on that date. The stock options will only vest, however,
if the optionee remains employed and the Company is successful in achieving at least 100% of the
target levels for each of the Company’s three financial metric targets for fiscal 2012, and if the
Company’s stock price equals or exceeds $5.00 per share for at least 20 trading days during any
90-day period during the option’s ten-year term.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">For the three months ended June 30, 2010 and June 30, 2011, the Company granted 5,419 and
3,282 shares from the 2004 Stock and Incentive Awards Plan to certain non-employee directors who
elected to receive stock awards in lieu of cash compensation. The shares were valued at $3.46 per
share and $4.19 per share, the closing market prices as of the grant date.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following amounts of stock-based compensation were recorded (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Three months ended June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Cost of product revenue
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">36</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">42</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">General and administrative
</div></td>
<td> </td>
<td> </td>
<td align="right">98</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">157</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Sales and marketing
</div></td>
<td> </td>
<td> </td>
<td align="right">109</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">148</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Research and development
</div></td>
<td> </td>
<td> </td>
<td align="right">5</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">248</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">352</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of June 30, 2011, compensation cost related to non-vested common stock-based compensation,
excluding performance stock option awards amounted to $4.1 million over a remaining weighted
average expected term of 6.7 years.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following table summarizes information with respect to the Plans:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="30%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14" style="border-bottom: 1px solid #000000"><b>Options Outstanding</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Average</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Shares</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Average</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Remaining</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Aggregate</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Available for</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Number</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Exercise</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Contractual</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Intrinsic</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Grant</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>of Shares</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Price</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Term (in years)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>value</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at March 31, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">1,577,676</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,658,768</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3.83</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6.60</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Granted stock options
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(873,311</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">873,311</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4.11</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Granted shares
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(3,282</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Forfeited
</div></td>
<td> </td>
<td> </td>
<td align="right">188,480</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(188,480</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">7.42</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Exercised
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(77,013</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">1.21</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at June 30, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">889,563</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,266,586</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3.88</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7.08</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,882,478</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Exercisable at June 30, 2011
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,874,548</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3.70</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5.11</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,965,319</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The aggregate intrinsic value represents the total pre-tax intrinsic value, which
is calculated as the difference between the exercise price of the underlying stock options and the
fair value of the Company’s closing common stock price of $3.93 as of June 30, 2011.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">A summary of the status of the Company’s outstanding non-vested stock options as of June 30,
2011 was as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="86%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Non-vested at March 31, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">1,832,167</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Granted
</div></td>
<td> </td>
<td> </td>
<td align="right">873,311</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Vested
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(124,960</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Forfeited
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(188,480</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Non-vested at June 30, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">2,392,038</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company has previously issued warrants in connection with various private placement stock
offerings and services rendered. The warrants granted the holder the option to purchase common
stock at specified prices for a specified period of time. No warrants were issued in fiscal 2011 or
during the three months ended June 30, 2011.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Outstanding warrants were comprised of the following:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Average</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Number of</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Exercise</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Shares</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Price</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at March 31, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">38,980</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2.25</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Issued
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Exercised
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Cancelled
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at June 30, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">38,980</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2.25</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">A summary of outstanding warrants at June 30, 2011 follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="7%"> </td>
<td></td>
<td width="4%"> </td>
<td width="4%"> </td>
<td width="30%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="30%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td colspan="2" nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Exercise Price</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Number of <br />
Warrants</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Expiration</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">$
</div></td>
<td align="right">
<div style="margin-left:15px; text-indent:-15px">2.25
</div></td>
<td> </td>
<td> </td>
<td align="right">38,980</td>
<td> </td>
<td> </td>
<td colspan="2" align="right">Fiscal 2015</td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 9 - us-gaap:SegmentReportingDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>NOTE I — SEGMENT DATA</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During the fiscal 2011 third quarter, certain activity of the Orion Engineered Systems
Division exceeded the quantitative thresholds required for segment reporting. As such,
descriptions of the Company’s segments and their summary financial information are summarized
below.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Energy Management</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Energy Management Division develops, manufactures and sells commercial high intensity
fluorescent, or HIF, lighting systems and energy management systems.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Engineered Systems</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Engineered Systems Division sells and integrates alternative renewable energy systems,
such as solar and wind, and provides technical services for the Company’s sale of HIF lighting
systems and energy management systems.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Corporate and Other</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Corporate and Other is comprised of selling, general and administrative expenses not directly
allocated to the Company’s segments and adjustments to reconcile to consolidated results, which
primarily include intercompany eliminations.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Revenues</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Operating (Loss) Income</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>For the Three Months Ended June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>For the Three Months Ended June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000">(dollars in thousands)</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2011</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Segments:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Energy Management
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">15,398</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">16,442</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">291</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">813</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Engineered Systems
</div></td>
<td> </td>
<td> </td>
<td align="right">1,579</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,332</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(412</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">84</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Corporate and Other
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,271</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,327</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">16,977</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">22,774</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(1,392</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(430</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Total Assets</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Deferred Revenue</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000">(dollars in thousands)</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">March 31, 2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">June 30, 2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">March 31, 2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">June 30, 2011</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Segments:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Energy Management
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">67,449</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">66,996</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">533</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">507</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Engineered Systems
</div></td>
<td> </td>
<td> </td>
<td align="right">14,405</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">17,831</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,506</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,400</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Corporate and Other
</div></td>
<td> </td>
<td> </td>
<td align="right">33,136</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">38,301</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">114,990</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">123,128</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,039</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,907</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company’s revenue and long-lived assets outside the United States are insignificant.
</div>
</div>